Deidra Jonas started as a janitor at The Gund Co. 16 years ago. It was one of four cleaning jobs she worked as a single mother. A manager noticed how careful she was and moved her to the machines. Then came reception, then customer service, then the culture team. Now she travels the world running listening sessions for the company's workers. She's 33, and Gund has never laid anyone off.
Allison Pohle tells the story on the front page of Friday's Journal. Gund is a family manufacturer in St. Louis with 1,300 employees. Steve Gund's grandfather, a former candy salesman, started it in 1951. Its composite parts turn up all over the power grid, in wind generators and in the green utility boxes on suburban lawns. Customers include General Electric and Rockwell Automation (ROK). Sales are approaching $400 million. The company has averaged 18% growth a year for a decade. Hundreds of executives have traveled to St. Louis to see how.
The tools are simple and hard. The company keeps its headcount tight, so a slow year doesn't force cuts. A worker with a problem writes it on a red card and posts it on the factory floor. Managers are expected to fix it quickly. The financials hang in the meeting rooms for everyone to see. Pay starts at the market average, and Gund shares its salary ranges. Entry-level factory workers start at $55,000 to $65,000 on average, before overtime and profit-sharing. People who don't fit the demanding culture are managed out. "It sounds touchy-feely, but it's profitable," Gund, 55, told the Journal. Profit margins have doubled in ten years, he says.
What an ESOP is
The biggest tool is ownership. In 2009 Gund started an employee stock-ownership plan, or ESOP, for its U.S. staff. An ESOP is a retirement plan that holds company stock for the workers. The company funds it, and employees earn shares over time. As of last year, Gund's workers owned 30% of the company that way. This year the company spent tens of millions of dollars to buy that plan back. It wants to relaunch a similar plan in every country where it operates, including China. When Steve and his brother Rich joined full time in the early 1990s, sales were $2.7 million. Leaders from more than 200 companies have now visited, and few have copied the model. "If we can do this, anybody can do this," Gund said.
Our read
This is a Career and Estate story, and it's for business owners most of all. Some of the bosses visiting Gund run companies their parents or grandparents founded. Sooner or later a family business has to choose. The owners can sell to outsiders, or they can find a way to grow it and keep it. An ESOP is a third door. The owner sells part or all of the company to a trust for the workers, often over years, and the family can keep running it. It isn't free, as Gund's buyback shows. Gund is private, so there's nothing to buy here.
Here's the connection to your own plan. If you own a business, pull out your succession plan or buy-sell agreement this week. Find the line that names who buys you out, and at what price. If that line is blank, an ESOP is worth pricing next to a sale or a family handoff. If you work for a company with an ESOP, read your statement instead. Note how much of your retirement sits in one private stock, and when it vests. Bring either one to a review and we'll walk through the choices together.